Determining how to collect delinquent HOA dues seems to be a constant issue for community association board members. After all, these are your neighbors. And you don’t want to alienate people you live with. No one wants to have that nagging feeling they may run into a neighbor at any moment who has delinquent assessments. That can make an evening stroll uncomfortable.
And yet how do you collect late assessments when all you are given is the option of placing a lien on the property and potentially foreclosing? The cost, alienation, and potential harm to property values makes for such an undesirable situation.
Why People Pay Their Bills
What makes people willing to pay their bills? One incentive is the need to maintain access to the service or product they’re paying for. Another motivation is when a reasonable and effective consequence exists for not doing so. Enter credit reporting.
Some in the community association industry believe everyone who’s late on their dues must by definition already have bad credit. Not true at all. Many homeowners who are able to pay dues are simply unwilling. You may see some with a new jet ski, car, or taking vacations – yet they aren’t paying assessments. If you look more closely though, you’ll notice they are paying bills that affect their credit report. This is not a coincidence.
Credit reporting HOA dues is very effective, and costs association boards nothing out of pocket when done properly. This means the association receives 100% of their collected dues.
The first thing to know is that there are two ways of credit reporting delinquent assessments; either as a trade line, or as a collection account. Credit reporting assessments as a trade line means you must report every homeowner every month – even those who are current. However, a more simple way is to only report unpaid dues – and report them as a collection account.
Many boards are unaware there’s a simple way to have delinquent members pay the cost of reporting; rather than having the association pay for it. More on that in a moment.
Other Helpful Steps
Other simple ingredients are very helpful when collecting dues before going down legal avenues. One is skip tracing. Skip tracing is the process of making sure you have the most accurate contact information for property owners, thus ensuring proper communication. This is particularly important when property owners use the home as a rental, or are out-of-state absentee owners (common with recreational property owners associations).
Once accurate contact information is found, a campaign of letters and phone calls works best to communicate the consequence of being reported as a collection account, if action is not promptly taken by homeowners. Make sure your process gives neighbors time to pay their debt before credit reporting occurs. Never use a system where reporting to bureaus happens at the start of the collection process. Such a practice is too abrasive and harms community relations. Remember, you’re motivating proper behavior here; not reprimanding people.
Many times association members will quickly get current the moment they learn you actually have the power to credit report them. They’ll treat assessments just like they do their other credit-reportable bills. It’s amazing how fast many homeowners respond once clearly notified of this impending consequence. In fact, you can expect about half of your delinquencies to get cured and come current with this method. Even more impressive is how community behavior changes once it's known an association wields this power. Your future delinquency rate drops.
Now here’s the best part. All this can happen right now, with no expense to your association and where you receive 100% of your collected dues. All these tools, along with clear progress reporting, are available simply by working with our firm which adds a small flat fee to delinquent balances. Start collecting your delinquent HOA dues today. Simply click here for more details, testimonials, and insight into this remarkable process.